Banning of Unregulated Deposit Schemes Bill, 2018

• During the Union Budget 2016-17, the then Finance Minister Arun Jaitley Jaitley had promised ‘a comprehensive central legislation’ to tackle illicit deposit schemes. Following this, the Union government has come up with two bills to tackle the menace of non-regulated deposit schemes. The Chit Funds (Amendment) Bill, 2018 was introduced in the Lok Sabha during the second leg of the Budget session. The second Bill is Banning of Unregulated Deposit Schemes Bill, 2018.

• The bill is aimed at tackling the menace of illicit deposit-taking activities in the country. Companies/ institutions running such schemes exploit existing regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard-earned savings,’ a Finance Ministry statement released by the Press Information Bureau on February 28 read.

• The proposed Bill aims to provide a comprehensive legislation to tackle Illicit deposit schemes by completely prohibiting such activities. Nine regulators including the RBI, SEBI, the Ministry of Corporate Affairs, and the State government regulate financial activities. According to the Bill, all deposit-taking schemes are required to be registered with the relevant regulator, failing which the “Deposit Takers’ will be considered ‘unregulated’ and hence be banned.

• According to the Bill, ‘Deposit Takers’ include all possible entities (including individuals) receiving or soliciting deposits, except specific entities such as those incorporated by legislation. ‘Deposits’ is defined in such a manner that deposit takers are restricted from camouflaging public as receipts, and at the same time not to curb or hinder acceptance of money by an establishment in the ordinary course of its business.

• The Bill creates three different types of offences, namely, running of Unregulated Deposit Schemes, fraudulent default in Regulated Deposit schemes, and wrongful inducement in relation to Unregulated Deposit Schemes.

• A ‘Competent Authority’ will be appointed which has the power similar to a civil court, including powers to attach properties of the deposit takers. It also empowers police to search and seize any property believed to be connected with an offence under the Bill, with or without a warrant.

• The Bill also approves creating designated courts to tackle such cases.

• The Bill enables the creation of an online central database, for collecting and sharing of information on deposit-taking activity in the country.